For the first time since 2023, the Bank of England has increased its Base Rate. Yesterday’s announcement confirmed a widely anticipated rise of 0.25 percentage points, taking it to 4%.
The increase itself was not a surprise.
However, there were two interesting details within the Monetary Policy Committee’s (MPC) decision.
Firstly, all nine members agreed that interest rates needed to rise – and that is both interesting and telling. The last vote in September was 6 to 3 in favour of a hold, unchanged from the vote in July. The MPC panel includes what are known as hawks and doves, and even the doves moved to vote for an increase on this occasion.
Secondly, there was one particularly hawkish vote in the mix. Eight members voted for the quarter-point increase, but the ninth, Catherine Mann, pushed a larger rise of 0.5 percentage points.
As a result of this, financial markets have begun reassessing what might happen next. Currency specialists Lumon have highlighted the possibility of another increase in December, with markets now pricing in approximately a 50% chance of another increase in December, whereas markets had previously by-and-large expected any further rise no sooner than January.
For homeowners, buyers, sellers and landlords, that might sound rather discouraging.
However, to understand what yesterday’s decision really means for the property market, we need to look beyond interest rates themselves.
Inflation Remains the Real Concern
The Bank of England’s decision tends to be driven by inflation, which reached 3.5% in September and is now forecast to approach 5% by the middle of 2027.
Much of this pressure originates overseas.
The continuing conflict in the Middle East has driven energy prices higher, increasing costs for businesses and households alike.
The Bank is concerned that these increases could eventually feed through into higher prices elsewhere in the economy, and subsequently into wage demands.
Its decision to increase Bank Rate is therefore intended to prevent today’s energy-price pressures becoming tomorrow’s persistent inflation.
Importantly, though, the Bank has emphasised that further increases are not inevitable. Much depends on how energy prices and the wider economy develop.
A Budget That Changed Less Than Expected
Last week’s Budget also forms part of this picture.
For all the speculation beforehand, the Chancellor delivered what might reasonably be described as a collection of relatively modest measures, rather than a dramatic change of economic direction.
There were no headline changes to Stamp Duty Land Tax or Capital Gains Tax, for example.
Landlords will feel hard done by, particularly when higher mortgage costs and maintenance expenses are already putting pressure on their returns. From April 2027, income tax rates applicable to property profits will rise by a further two percentage points, on top of the two-point increase already scheduled. The resulting rates will be 24%, 44% and 49%, depending on the taxpayer’s circumstances.
That stings, and it would be remiss of us not to recognise it – and it will undoubtedly influence whether some landlords decide to ‘stay in the game’ or reconsider their options.
Nevertheless, the wider Budget offered relatively little to fundamentally alter the housing market’s immediate trajectory.
And that may not necessarily be a bad thing. Sometimes, a degree of predictability is more valuable than a dramatic intervention – and a stable economic environment over the next few months might be what the MPC needs to adopt a less hawkish approach over forthcoming meetings.
Could America be the Bigger Story?
Arguably, the most significant economic development this week happened thousands of miles away.
Tuesday’s American midterm elections saw the Democrats gain control of both houses of Congress, dramatically changing the political landscape for President Donald Trump’s remaining two years in office.
Why should that matter to somebody buying, selling or renting a home in Britain?
Because financial markets are international.
The prospect of a more constrained American administration has already influenced expectations about government spending, economic policy and future borrowing.
American government bond yields have fallen, with similar moves in British gilt markets, where yields fell to their lowest level since late August as investors pulled money from international stocks in a broader ‘flight to safety’.
On the one hand, falling bond yields can be a symptom of weaker economic performance, but on the other, this can reduce the cost of borrowing for the UK government, with corresponding economic benefits.
Meanwhile, hopes that the changing political situation in the USA could encourage progress towards ending the conflict in the Middle East have contributed to a fall in oil prices.
These developments matter because UK fixed-rate mortgage pricing is influenced by financial-market expectations – and particularly swap rates – rather than simply following Bank Rate. In fact, even after yesterday’s decision, Moneyfacts reported that Barclays has reduced a 60% LTV fixed rate product by 0.3 percentage points.
Lower global energy prices could also help ease inflationary pressures, potentially reducing the need for further Bank Rate increases.
This is all speculation, of course – but the point is, there is no certainty that interest rates will increase or that the economic outlook will get worse. If anything, it illustrates why the outlook can change remarkably quickly, and why events in Washington could ultimately prove more influential than a single MPC decision.
And as far as the Edgware property market goes, these sorts of international issues can have very local consequences.
What Does This Mean for Residential Sales?
For buyers and sellers, affordability remains the central issue.
According to Zoopla’s October House Price Index, the number of homes available for sale is 7% higher than a year ago, whilst sales agreed are 7% lower.
Meanwhile, annual house price growth stands at just 0.8%.
That is not a market in freefall, although house price growth at 0.8% falls well below inflation, now recorded at 3.5% for September 2026 – although it is noteworthy on a local level that prices in Edgware have actually increased by a healthier 3% over the same period. That is not so far away from the inflation figure.
Nevertheless, buyers have considerably more choice and are increasingly sensitive to price, locally as well as nationally – and that is a recipe for a more stubborn market, particularly if sellers and their estate agents try to inflate asking prices beyond the realms of what the market deems believable.
Higher mortgage costs will inevitably affect what some households can afford, particularly first-time buyers and those approaching the end of existing fixed-rate deals. But borrowing rates are not necessarily destined to rise indefinitely.
The key consideration for sellers, as noted above, is to price realistically from the outset, while buyers should seek mortgage advice sooner rather than later and make decisions based on up-to-date advice, rather than speculating about future rates.
What About the Lettings Market?
The picture for landlords and tenants is somewhat different.
RICS reported strengthening tenant demand in September, alongside continuing constraints on the supply of rental properties.
That underlying imbalance, of course, continues to support rental values. The average rent in Edgware has reached £1,889 per month, and that is a 6% increase over the past 12 months.
Nonetheless, landlords now face a combination of higher financing costs, increased taxation and existing regulatory responsibilities.
Some may consider increasing rents to offset those pressures but rent reviews must be commercially realistic and reflect local market evidence, as well as the relevant legal requirements.
Others may reassess their investment strategies, particularly where borrowing costs are significant.
Yet the longer-term fundamentals of rental property have not disappeared, not least here in Edgware. People still need somewhere to live, and they are looking for good accommodation. Well-maintained properties in areas with sustained demand will continue to offer attractive investment opportunities.
A Market That Needs Perspective
There is no escaping the fact that another Bank Rate rise creates challenges for the property market.
But we should be careful not to judge this announcement in isolation.
We have had a relatively restrained Budget, an important political change in America, shifting global energy prices and a Bank of England responding to inflationary pressures that are themselves heavily influenced by international events.
Some of these forces are pushing borrowing costs upwards – but others could eventually pull them down, especially with investors seeking the safety of British gilt bonds.
For buyers, sellers, landlords and tenants, my message is not to panic, and not to assume that yesterday’s news means a tougher tomorrow – at least certainly not longer-term.
Remain informed, take advice and make decisions based on your individual circumstances and the realities of this local property market.
Economic headlines may change weekly, or even daily – but ultimately, the fundamental need for somewhere to call home does not.